There are no mulligans or do-overs when it comes time to sell your business — you must get it right the first time. Frequently, business owners make critical mistakes when trying to sell their business without advisors. This often happens when the owner is trying to sell to an employee. Simply put, there is no substitute for experience when it comes to selling your business.
Below are some common examples of scenarios that frequently occur when an experienced M&A advisor is not involved. Read on to learn more, and if you’re considering selling your land surviving business or your architectural or engineering business, reach out to Allen Business Advisors to get started.
Employees support their families by working for you. If they are aware that the business is for sale, they may become concerned about their future. As a result, they may look for employment elsewhere. The loss of an employee will impact your sale. The degree of impact is based on the employee’s role in your company and your bench strength to replace the employee. Also, when it comes to architectural, engineering, and land surveying businesses, a key motivator for the acquisition is the employees. As you know, there is currently a shortage of qualified employees. Selling a business is about the paperwork. When business owners sell their business, they are seeking to sell for more than the value of the physical assets. Most business owners do not know what paperwork should be provided. Let alone when and how to present the information. An experienced M&A advisor like those at Allen Business Advisors will ensure that all of the proper documents are filled out and are presented and filed properly. When business owners sell to their employees, it is common for the owner to ask for a down payment and provide the buyers a loan for the balance. This shifts a disproportionate amount of the risk to the seller. If the new owner doesn’t pay, this could impact your retirement. According to Small Business Genius, 39% of Americans desire to own a business, yet only 8.9% of Americans actually own a business. The owner needs to ensure that the employee is willing to take the risk to actually become a business owner. If the employee is married, you need to ensure the spouse is supportive of the purchase. If the spouse is not supportive, there is a strong chance the transaction will not close. Another part of pre-qualifying the employee is ensuring they have a sufficient down payment. Another frequent error that happens when an owner is trying to sell their business is not having experienced advisors. Selling a business is complex and time-consuming. In fact, this process is so complex, that you should have multiple advisors. The M&A advisor will provide you with information about the price of the business and ensure that there is a systematic process for selling the business. A key role they play is ensuring that the relationship between the parties is maintained. Frequently, the sale of a business becomes contentious because the parties have polar opposite interests. It is also important that you have an experienced M&A attorney. They will have experience ensuring that cash, account receivables, inventory, work-in-process, and deposits are handled correctly. Additionally, an experienced CPA is also required. The CPA will ensure that you pay the least amount of taxes that you are obligated to pay.
Confidentiality is Not Maintained
Additionally, you do not want your clients to become aware that you are selling your company because they may use this as an opportunity to shop around. Losing clients, especially key clients, will also have a negative impact on your business. Additionally, you do not want your vendors to be aware that your business is for sale because they talk with everyone, including your competitors. Your competitors can use this information to steal your clients.
In summary, you want everyone to sign a non-disclosure and confidentiality agreement before they learn that your business is for sale. This includes all potential buyers, including employees that desire to purchase your business. The time to tell your employees, clients, and vendors is after the sale is completed while you are introducing the new owner.
Accurate and Timely Information is Not Provided
Assuming the Risk
Not Pre-Qualifying the Employee
Failing to Involve Key Parties
Contact Us For Your Free Consultation Today!
Whether you are interested in selling your engineering business, architectural business, or land surveying business, Allen Business Advisors is the company to call. We specialize in assisting business owners throughout the east coast with selling their business and ensuring a smooth transaction while avoiding the common pitfalls we discussed today. Contact Allen Business Advisors today to learn more.